Lesson 3: You can spend money immediately or you can use money for later

Lesson 4: There are different prices for things

Lesson 5: When you don’t have enough money, you can save your money until you have enough

Lesson 6: How to read prices for things in the shop

Lesson 7: Setting out financial goals and how to plan for it

Previously we shared about lesson 1 & 2. We taught Noe that chores translates to money (coins, in fact), instilled new rule in the house to use the money to watch TV. Every day, we evaluate what Noe did on that day, and he gets some money based on chores done, about 2-3 coins. Sometimes he could spend 2 coins to buy lollypop, or use one coin for duration of TV. Usually, Noe would spend all the coins he got for the day, on the day itself. In the beginning, Noe would cry when he ran out of money, begging us to watch TV for free. Of course we didn’t budge, and over time we managed to make him understand that the rule stays: He needs to pay for TV. Now let’s see if we can share lesson 3-5.

We slowly stretched the money lesson to introduce the concept that the money can be used for later. At first, we encouraged Noe to keep the money in the box, so that he could use it later. For example, if he wanted to watch TV in the morning, just before he went to school, we would present him with the choice, that he could use the money for morning TV but would not have enough to afternoon TV later. At first he would demand to use the money immediately. But slowly, after repeating the same situation, he learned that the money pays better to be used in the afternoon, when the TV-watching duration is longer. To our surprise, one morning he stopped asking to watch TV before school, and we asked why. He said, he wanted to use the money for later.

The small convenience store in our apartment complex turned out to be a great place to learn about money too. It has all things that fascinate my little kids. The price tags are displayed right in front. Noe has learned about numbers in the school, and he enjoys counting. So perhaps we could introduce him the next lesson, that there are different prices for things. Remember, previously, we introduced the concept of buying and selling using money, by buying a lollypop. This time, we presented to Noe that lollypop equals to 2 coins, while small ice cream bar is 5 coins, and bigger ice cream bar is 10 coins. Then we asked him, “Do you want to buy ice cream?” and Noe said yes. Then we said, “But you only have three coins, that’s not enough to buy ice cream”. Then we offered him, “How about we keep the coins for now, and when you have enough, you can buy the ice cream”. We gave Noe a new red box, for savings. So, now he has two boxes, one is the jar he uses for TV spending, and the red box for savings.

Then we went back to our house, and Noe asked to watch TV. We reminded him, “But you need to use the money to buy ice cream tomorrow?” Noe gave a thought, and decided to play lego instead of watching TV. The next day, we evaluated Noe’s home chores again, and he got three more coins. We opened up the red box, and count the coins, one by one. 1, 2, 3, 4, 5, 6 coins in total… “Noe, you have enough to buy ice cream. You need 5 coins, but now you already have 6. So you can buy ice cream and use one coin to watch TV!”. He was so elated, and we immediately went down to the shop to buy the ice cream.

We needed to use a small saving project – the one that requires only two or three days of savings, only to introduce the concept, that money can be saved. We also needed different box, so that he could visually assign each box for different use. And the key in the learning, is to present the concept, show the practice, present the options with its possible consequences, and allow the kid to take his own decision based on the lesson.

It’s interesting to see that in such young age, Noe has learned about doing a job (chores), getting a salary (chores evaluation), buy-sell concept (at the shop buying lollypop), savings (red box), and portfolio allocation (red box for savings vs jar for spending).

And more importantly, he began to learn about delaying gratification. This is a key lesson that would be valuable even until he's an adult.

Note: It's not so straightforward to learn about price tags in Rupiah since it has so many zeros. We resorted to use only the digits of Thousands Rupiah. For example, Rp 10,000 means Noe needs to pay using ten coins. Another problem is that the coins used are of the value of Rp 500. But just for the sake of ease of calculation, we treat the Rp 500 coins as Rp 1,000. So, in reality, we needed to top-up the shortfall to the cashier when Noe did the payment.